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# Professional Liability Insurance

Management Consultants Insurance - The Role Of Professional Indemnity

We are seeing a modern reliance of organisations employing management consultants to enhance business performance. The day-to-day activities of a management consultant can be complex and varied-but typically provide advice to those in charge of running a business.

As a 'professional' management consultants owe a legal duty of care to their clients - and as such are liable for any damage resulting from negligent advice, design or acts. In today's litigious society even the most respected consultants can find themselves in a dispute with a client over a mistake-so here we examine the role professional indemnity insurance plays in protecting consultants from incurring financial loses.

What is professional indemnity insurance?

Professional indemnity insurance provides protection for any negligent advice or service provided by a consultant. Its designed to safe-guard against claims made for any resulting financial loss or damage to their reputation. It covers both legal fees and costs.

What does it protect against ?

A typical professional indemnity policy will protect a management consultant against the following;
  • Negligence or error
  • Infringement of intellectual property rights
  • Loss of clients documents, money or data
  • Unintentional defamation (also known as libel or slander)
  • Unintentional breach of confidential information


    • Do claims really happen ?

    Yes they do, here is one example.

    A Management Consultant who specialised in Human Resources was hired to help with executive decision making for a major Plc. The consultant recommended a re-organisation plan which the client implemented. Later the client sued the insured alleging improper advice as the reorganization plan did not yield the expected monetary results. Insurers settled at £450,000.

    For a claim to be covered professional indemnity insurance must be in place at the time the claim is made. It is not sufficient to commence a policy after a claim has been made.

    How much cover & what's the cost ?

    £1 million worth of professional indemnity insurance is generally considered adequate for most management consultants. However some clients, notably government agencies often request £2 million level of cover in their terms of business.

    Professional indemnity premiums vary from broker to broker, dependent on one's fee income & level of cover required. Lower indemnity levels (£100,000) are available at around £150-£180 per annum, rising to circa £350-£400 per annum for £1 million cover.

    How do I get professional indemnity quotes ?

    Depending on the size of your business & the complexity of cover you need you can either buy low cost professional indemnity insurance online or contact a specialist insurance broker. .

    Be sure to read the policy carefully, taking note of any exclusions and that cover is underwritten by a quality insurer.